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Econ Midterm 2 Study

Terms in this set (190)

GDP is:
the value of all final goods and services produced domestically.
Final goods or services used to compute GDP refers to:
goods and services purchased by the ultimate users.
Consumption in the United States is about ____________ of GDP, and it moves relatively little over time.
68%
The demand measure of GDP accounting adds together:
consumption, investment, government purchases, and trade balance.
Consumption is the purchase of goods and services by:
households.
Which of the following are most likely classified by economists as consumer durable goods?
automobiles, furniture
Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then:
exports exceed imports by $50 billion.
The value of what businesses provide to other businesses is captured in the final products at the end of the __________ chain.
production
___________ is a small category that refers to the goods produced by one business that have yet to be sold to consumers, and are either still sitting in warehouses and on store shelves.
Inventories
In order to avoid double counting, statisticians just count the __________________.
final goods and services
Which of the following is included in the calculated Gross Domestic Product?
A local ice cream store sells $17,000 worth of cones and sundaes on July 1.
Which of the following is not counted as a part of GDP?
the purchase of 100 shares of AT&T stock by your grandfather.
Which of the following is not included in GDP?
cash income paid to a day laborer that is not reported to the tax authorities
_________ are now the largest single component of the supply side of GDP, representing over half of GDP.
Services
To compare the GDP of two different countries with different currencies, it is necessary to use _________________________.
an exchange rate
___________ is about two-thirds of the demand side of GDP, but it moves relatively little over time.
Consumption
Durable goods and non-durable goods comprise approximately ________ of the supply side of the GDP.
45%
_________ is calculated by taking _________ and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year.
NNP; GNP
Which of the following is included in GDP calculations?
the university tuition paid to enroll in a course
Which of the following is included in GDP?
the fees charged for a stock broker's services
GDP does not directly include:
B. the value of intermediate goods sold during a period.
GDP in the United States in 2012 was about
$16.2 trillion
Investment (I) includes:
the amount spent on new factories and machinery.
Middle-income countries, which include much of Latin America, Eastern Europe, and some countries in East Asia, have per capita GDP in the range of ___________.
$6,000 to $12,000
A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are:
expansion, peak, recession, trough
Which of the following is true?
The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.
For most high-income countries of the world, GDP _________________ over time.
has risen gradually
If imports exceed exports, as in recent years, then __________ exists.
a trade deficit
On the demand side of GDP, consumption by _____________ is the largest component of GDP, accounting for about two-thirds of the GDP in any year.
households
In 1980 Denmark had a GDP of $70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Denmark had a GDP of $160 billion (measured in U.S. dollars) s and a population of 5.3 million. By what percentage did Denmark's GDP per capita rise between 1980 and 2000?
120%
India has a GDP of 23,000 billion Indian rupees, and a population of 1.1 billion. The exchange rate is 50 rupees per U.S. dollar. Calculate the GDP per capita of India as measured in U.S. dollars.
$418
Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per capita GDP
Ethiopia = $145.00 Costa Rica = $2250.00
In 1990, the GDP of Canada was $680 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 85 U.S. cents. In 2000, the GDP of Canada was $1000 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 69 U.S. cents. By what percentage did the GDP of Canada increase from 1990 to 2000 in Canadian dollars?
47%
The Czech Republic has a GDP of 2,000 billion koruny. The exchange rate is 20 koruny per U.S. dollar. The Czech population is 20 million. Calculate the per capita GDP of the Czech Republic in U.S. dollars.
$5000
The gap between exports and imports in a nation's economy is called the ___________.
trade balance
_______________, which can be approximated by the growth of gross domestic product, ultimately determines the prevailing standard of living in a country.
Economic growth
Once every __________, the Census Bureau does a comprehensive survey of housing and residential finance.
10 years
On the supply side of the GDP, Structures account for around __________ of U.S. GDP.
7%
The change in inventories, a component of aggregate supply, comprises roughly __________ of GDP.
0.5%
Which of the following statements is true?
GDP includes spending on recreation and travel, but it does not cover leisure time.
The difference between nominal GDP and real GDP is:
real GDP adjusts for inflation
The nominal value of any economic statistic refers to the number that is actually announced at that time, while the ________________ refers to the statistic after it has been adjusted for inflation.
real value
The nominal value of US GDP in the year 2014 was $17,348.1 billion. The value of the GDP Deflator in 2014 was 108.6858. Therefore, real GDP in 2014 was _____.
$15,961.7 billion
During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _________ per year.
2%
_____________________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.
The Industrial Revolution
To achieve a high standard of living, a nation should:
promote economic growth.
In the long run, the most important source of increase in a nation's standard of living is a:
high rate of economic growth.
In macroeconomics, the connection from inputs to outputs for the entire economy is called _______________.
an aggregate production function
The value of what is produced per worker, or per hour worked, is called ____________.
productivity
When society has a higher level of capital per person, it is called ______________.
capital deepening
A nation can achieve higher economic growth if:
it devotes more resources to research and development.
_________ is output per hour in the business sector.
Productivity
Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age
30
When discussing economic growth, it is often useful to focus on ____________, to avoid studying changes in the size of GDP that represent only having more people in the economy, and focus on those increases in GDP which represent an actual rise in the standard of living on a per person basis.
GDP per capita
Of the world's population of 6.7 billion people, _________ are scraping by on incomes that average less than $2 per day.
5 billion
Which of the following is correct?
Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.
Investment in human capital:
B. can be acquired through on-the-job training.
C. is an important source of economic growth.
*D. is characterized by both b) and c).
Economists typically measure economic growth by tracking:
real GDP per capita.
Which of the following is most likely to contribute to economic growth as measured by GDP per capita?
increased capital formation
To achieve a high standard of living, a nation should:
promote economic growth.
Country Alpha and Country Beta initially have the same real GDP per capita. Country Alpha experiences no economic growth, while Country Beta grows at a sustained rate of 5 percent. In 14 years, Country Alpha's GDP will be approximately _________ that of Country Beta.
one-half
Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP will be approximately ___________ that of Country Able.
double
In the long run, the most important source of increase in a nation's standard of living is a:
high rate of economic growth.
Which of the government policies below is most unlikely to encourage per capita economic growth?
high taxes on companies that spend a lot on capital formation
Over the long run, ____________ per hour is the most important determinant of the average wage level
productivity
Increased investment alone will guarantee economic growth.
This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.
A nation can achieve higher economic growth if:
it devotes more resources to research and development.
Which of the following best describes the relationship between economic growth and literacy?
Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.
____________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.
Industrial Revolution
Which of the following is unlikely to affect the rate of economic growth?
the level of government spending
Which of the following did not result in economic growth?
Many citizens emigrating from Zimbabwe when a politically repressive regime took office.
A country will roughly double its GDP in twenty years if its annual growth rate is:
3.5 percent.
Which of the following factors contribute to economic growth?
. an increase in the proportion of the population that is college educated
Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth.
technology
Which of the following factors contribute to economic growth?
the discovery of new oil reserves
Some recent economic research has suggested that African countries' economic growth may have been limited by __________________ .
geography and climate
Some prominent members of the slow-economic growth country club include a high-income country like _________.
Germany
A nation's prosperity is sometimes measured in terms of ___________.
GDP per capita
In certain African countries like Niger, Tanzania, Nigeria, and Sudan, for example, GDP per capita at the start of the 2000s was still less than $___________.
300
An economy's rate of productivity growth is closely linked to the growth rate of its ______________, although the two aren't identical.
GDP per capita
In the early 2000s, the illiteracy rate for girls between the ages of 15 and 24 was __________ and the illiteracy rate for males in this age group was ______________.
78%; 75%
The unemployment rate measures:
unemployed workers as a percentage of the labor force.
During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force.
25%
Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:
out of the labor force.
The U.S. unemployment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of ____________.
4%-6%
If the unemployment rate is 8 percent, then this means:
8 percent of the labor force is unemployed.
If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals:
25%.
During the deep recessions of the early 1980s and of 2007-2009, unemployment reached roughly __________.
10%
A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:
frictionally unemployed.
Frictional unemployment is:
unemployment that is due to normal turnover in the labor market.
If a nation's labor force receives a significant influx of young workers:
the natural rate of unemployment is likely to increase.
The type of unemployment that occurs because of a recession is called:
cyclical unemployment.
The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied.
equilibrium wage
The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________.
business cycle
The most significant real economic cost of high unemployment is:
the potential goods and services that might have been produced but weren't.
Women composed __________ of the paid workforce in 1900 and 50% of the paid workforce in 2010.
18%
Karen chooses to go to university fulltime rather than to work. Karen:
is not part of the labor force.
In November 2010 the labor force in Siouxtown, was 14,800. There were 14,483 persons employed. The local unemployment rate:
was 2.1%.
The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals:
14.4%.
______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions
Efficiency wage theory
Freelife, New Hampshire has a labor force of 78,567 persons and employment of 74,382. The unemployment rate for the city is:
5.3%.
If the unemployment rate is 6 percent and the number of persons unemployed is 6 million, then the number of people employed is equal to:
94 million.
Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be:
underemployed.
Which of the following statements is incorrect?
Employment insurance compensation increases the opportunity cost of being unemployed.
Through good economic years and bad, many European economies had unemployment rates hovering near _________ since the 1970s.
10%
Craigburg has a working age population of 20 million. Of those, 11 million are employed and 1 million are unemployed. The unemployment rate is ________ and the participation rate is __________.
8.3%; 60%.
Cyclical unemployment arises when:
business activity in the macroeconomy declines.
Frictional unemployment occurs when:
a worker decides to quit one job to seek a different job.
A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as:
cyclically unemployed.
The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay.
adverse selection of wage cuts
The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce:
frictional unemployment.
Each month the Census Bureau carries out the Current Population Survey (CPS) (which has been carried out every month since 1940). A total of __________ households are contacted every month.
60,000
The unemployment rate may overestimate the true extent of unemployment if:
B. many people who claim to be unemployed actually work in the underground economy.
C. people falsely claim that they are actively seeking work in order to receive unemployment benefits.
*D. either B) or C) occurs.
Insofar as government public policy is concerned, the best way to battle unemployment would be __________________.
to minimize recessions
The labor force consists of:
all adults who are working or actively seeking work.
The unemployment rate may underestimate the true extent of unemployment if:
many part-time employees would like to work fulltime, but are unable to get the additional work.
The unemployment rate may underestimate the true extent of unemployment if:
many people become discouraged and cease looking for work.
A university student who is enrolled in school fulltime and not seeking employment is considered:
out of the labor force.
Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate?
It would fall.
The extent of _______________________ will depend on how easy it is for workers to learn about alternative jobs, which may reflect the ease of communications about job prospects in the economy.
frictional unemployment
__________ implies that pressure for price increases reaches across _______________markets, not just one.
inflation; most
While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.
ongoing rise
The effects of inflation are seen in:
goods, services, wages and income levels
Inflation implies that the level of all prices _____________________.
increase
When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership?
16.66%
Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.
the basket of goods
If the price index moves from 107 to 110, the rate of inflation is:
2.8%
The most commonly cited measure of inflation in the United States is:
the Consumer Price Index (CPI).
One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is:
substitution bias
The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.
inflation rate
The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories.
80,000; 200
Two factors that complicate the calculation of the inflation rate are:
substitution and quality/new product bias
When we want to measure wage inflation in the labor market, we use the:
Employment Cost Index
The Producer Price Index is based on prices paid for supplies and inputs by:
producers of goods and services
The ____________________ is based on the prices of merchandise that are exported or imported.
International Product Index
Another term used to describe negative inflation is:
deflation
In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________.
hyperinflation
Which of the following is an example of one of the major categories in the overall CPI?
recreation
The situation where the buying power of money in terms of goods and services increases is called:
deflation.
Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods?
Producer Price Index
What name is given to the index based on the prices of exported or imported merchandise?
International Price Index
An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?
GDP Deflator
The GDP deflator is a price index that includes the following components of GDP:
Consumption, Investment, Government plus Exports minus Imports
With regard to the economy, the term negative inflation is synonymous with which of the following?
deflation
An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain?
18.34%
Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?
$2,449 billion
What distinguishes the real value of a statistic from the nominal value of a statistic?
adjusting for inflation
Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract?
COLA plus 2.4%
When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________.
indexed
In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.
cost of living adjustments
The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices.
overstate
The __________________ is the nominal interest rate minus the rate of inflation.
real interest rate
A payment is said to be ________________ if it is automatically adjusted for inflation.
indexed
A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned.
inflation
_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.
Neoclassical economists; long run
Aggregate supply (AS) denotes the relationship between the __________________ that firms choose to produce and sell and the _________________, holding the price of inputs fixed.
total quantity; price level for output
The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:
potential GDP.
The term "full employment GDP" is synonymous with which of the following?
potential GDP
In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services demanded and the price level for output.
aggregate demand (AD)
_________________ results when an economy experiences high unemployment and high inflation at the same time.
Stagflation
Say's Law argues that a given ____________________ must create an equivalent ________________________ somewhere else in the economy.
value of supply; value of demand
When the economy of a country is operating close to its full capacity:
cyclical unemployment is close to zero.
Potential GDP in the U.S. will be unaffected by ____________________.
the unemployment rate
Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be:
short-term
If Keynes' law applies during economic contractions and Say's law applies during economic expansion, how will the three goals of macroeconomics be affected?
trade-offs and connections may differ in the short run and the long run
If the price level of what firms produce is rising across an economy, but the costs of production are constant, then:
higher profits will induce expanded production.
_______________________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.
Full employment GDP
What term is used to describe the maximum quantity that an economy can produce, in the context of its existing inputs, market and legal institutions?
potential GDP
In an AD/AS model, the point where the economy has excess capacity is called the:
Keynesian zone of the AS curve
In an AD/AS model:
real GDP is shown on the horizontal axis.
Which of the following must be present in order for the aggregate supply curve to form an upward slope?
fixed cost of inputs combined with rising prices for outputs
When prices of outputs in an economy become sufficiently high causing production to exceed potential GDP, the resulting:
A. hyper-intense production will be unsustainable in the long run.
Due to inflationary pressures, the national income of households has been spread across a higher overall price base for goods and services. How will this affect be shown in an AD/ASAD/AS model?
a downward sloping AD curve
The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment.
interest rate effect
Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model?
it shifts the AS curve in the long-term
Changes in the different components of aggregate demand brought about by changes in the price level are reflected in the AD/ASAD/AS macroeconomic model by a ________________________.
downward sloping AD curve
Which of the following will have the greatest influence on the slope of the demand curve in a single market model?
substitute goods
As the aggregate price level in an economy rises, ____________________.
interest rates increase
As the aggregate price level in an economy decreases,
. imports decrease.
Aggregate demand curves slope downwards for each of the following reasons EXCEPT
The substitution effect: As the price level falls, people buy more of the cheaper goods and less of other goods.
Aggregate supply curves are ________________________ for low levels of output, and ____________________________ for high levels of output.
relatively flat; relatively steep
In an AD/ASAD/AS diagram, __________________________ could explain a rise in cyclical unemployment?
a shift to the left in either AS or AD
In an AD/AS diagram, an increase in structural unemployment will:
have no effect on AS or AD.
When an economy's output increases and the price level decreases, the _________ curve has shifted to the ____________.
AS; right
Whether the economy is in a recession is illustrated in the AD/AS model by how close the _____________________ is to the potential GDP line.
equilibrium
The __________________ in an AD/AS diagram is most relevant to Keynes's Law.
flat portion of the AS curve
The ____________________ in an AD/AS diagram is most relevant to Say's Law.
steep portion of the AS curve
The _________________ means that a higher price level leads to lower real wealth.
wealth effect
The _____________ holds that a rise in price level will make domestic goods relatively more expensive, ____________ exports and _______________ imports.
foreign price effect; discouraging; encouraging
Melanie decided to save 20% of her annual earnings for 10 years so she would have a down payment for a house. After 5 years, what change in the economy would cause an increase in the purchasing power of the funds she has managed to save?
deflation
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